109 HR 555 IH: School-As-Lender Reform Act of 2005 U.S. House of Representatives 2005-02-02 text/xml EN Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain.

I 109th CONGRESS 1st Session H. R. 555 IN THE HOUSE OF REPRESENTATIVES February 2, 2005 Mr. Kildee (for himself and Mr. Van Hollen) introduced the following bill; which was referred to the Committee on Education and the Workforce A BILL To establish additional safeguards on schools acting as lenders under the Federal Family Education Loan Program.

1.

Short title

This Act may be cited as the School-As-Lender Reform Act of 2005.

2.

School-as-lender reform

Section 435(d)(2) (20 U.S.C. 1085(d)(2)) is amended to read as follows: (2)

Requirements for eligible institutions

(A)

In general

To be an eligible lender under this part, an eligible institution— (i)shall employ at least one person whose full-time responsibilities are limited to the administration of programs of financial aid for students attending such institution; (ii)shall not be a home study school; (iii)shall make loans to not more than 50 percent of the undergraduate students at the institution; (iv)shall not make a loan, other than a loan to a graduate or professional student, unless the borrower has previously received a loan from the school; (v)shall award any contract for financing, servicing, administration, or administration of loans under this title on a competitive basis; (vi)shall offer loans which carry a reduced origination fee, or a lower interest rate, or both, than are authorized under the provisions of this title; (vii)shall not have a cohort default rate (as defined in section 435(m)) greater than 10 percent; (viii)shall use any proceeds from special allowance payments and interest payments from borrowers, and any proceeds from the sale or other disposition of loans, for need-based grant programs; and (ix)shall, for any year for which the institution engages in activities as an eligible lender, provide for a compliance audit conducted in accordance with section 428(b)(1)(U)(iii)(I), and the regulations thereunder, and submit the results of such audit to the Secretary. (B)

Administrative expenses

An eligible lender under subparagraph (A) shall be permitted to use a portion of the proceeds described in subparagraph (A)(viii) for reasonable and direct administrative expenses. (C)

Supplement, not supplant

An eligible lender under subparagraph (A) shall ensure that the proceeds described in subparagraph (A)(viii) are used to supplement, and not to supplant, non-Federal funds that would otherwise be used for need-based grant programs. .